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Sovereign Debt Restructuring: The Judge, the Vultures and Creditor Rights

19 Pages Posted: 21 Sep 2007  

Marcus H. Miller

University of Warwick - Department of Economics; Institute for International Economics; Centre for Economic Policy Research (CEPR)

Dania Thomas

Keele University - School of Law; University of Warwick - Centre for the Study of Globalisation and Regionalisation (CSGR)

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Abstract

What role did the US courts play in the Argentine debt swap of 2005? What implications does this have for the future of creditor rights in sovereign bond markets? The Judge in the Argentine case has, it appears, deftly exploited creditor heterogeneity - between holdouts seeking capital gains and institutional investors wanting a settlement - to promote a swap with a supermajority of creditors. Our analysis of Argentine debt litigation reveals a "Judge-mediated" sovereign debt restructuring which resolves key issues of Transition and Aggregation - two of the tasks envisaged for the IMF's stillborn Sovereign Debt Restructuring Mechanism. For the future, we discuss how Judge-mediated sovereign debt restructuring (together with creditor committees) could complement Collective Action Clauses in sovereign bond contracts.

Suggested Citation

Miller, Marcus H. and Thomas, Dania, Sovereign Debt Restructuring: The Judge, the Vultures and Creditor Rights. The World Economy, Vol. 30, No. 10, pp. 1491-1509, October 2007. Available at SSRN: https://ssrn.com/abstract=1015640 or http://dx.doi.org/10.1111/j.1467-9701.2007.01059.x

Marcus H. Miller (Contact Author)

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom
+44 24 7652 3048/9 (Phone)
+44 24 7652 3032 (Fax)

Institute for International Economics

1750 Massachusetts Avenue, NW
Washington, DC 20036-1903
United States

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Dania Thomas

Keele University - School of Law ( email )

Keele, Staffordshire ST5 5BG
United Kingdom

University of Warwick - Centre for the Study of Globalisation and Regionalisation (CSGR)

Coventry CV4 7AL
United Kingdom

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